Snohomish County PUD took on one of the world’s largest companies and won.
Federal energy regulators on Wednesday ruled that bankrupt energy trader Enron Corp. can’t force the PUD to pay millions for the early cancellation of an electricity contract signed in 2000.
That decision saves PUD customers between $140 million and $180 million.
“It’s hard to find words to express the excitement over here at the PUD,” said Steve Klein, the utility’s new general manager. “We also reflect on the fact that this is a tremendous win for the ratepayers of Snohomish County.”
Not having to pay will save the PUD’s 300,000 customers as much as $500 each, the utility’s officials said.
Enron claimed that the PUD owed it $117 million, plus five years of interest, for canceling the contract early.
If it lost, the PUD would have had to fight it out in bankruptcy court with Enron’s debt collector.
The Federal Energy Regulatory Commission on Wednesday rejected Enron’s argument, saying that “Enron’s financial fraud induced Snohomish to enter into the contract.”
And the PUD would not be held liable for being the victim of fraud, they said.
The energy regulators used 2005 federal legislation authored by U.S. Sen. Maria Cantwell, D-Wash., to invalidate Enron’s claim against the PUD.
“It’s a great victory for the little guys of our state,” Cantwell said minutes after hearing the agency’s decision.
U.S. Rep. Rick Larsen, the 2nd District Democrat, called it a super day.
“‘Superman Returns’ came out (Wednesday),” he said. “If truth, justice and the American way still exists in this country, then it showed in FERC’s decision to let Snohomish County ratepayers off the hook to bail out Enron.”
U.S. Rep. Jay Inslee, the 1st District Democrat, went with a bank-robber theme.
“It’s about time,” Inslee said. “Enron demanding another $130 million was like Bonnie and Clyde asking for a refund from a bank they just robbed. Enough is enough. Enron shouldn’t get another dime.”
Fight starts
Enron’s 2001 demand for cash teed off an unlikely David-vs.-Goliath battle and eventually turned the PUD into the focus of a national story.
The fight heated up in 2004 when the PUD uncovered hours of taped conversations of Enron traders crudely planning to scam “Grandma Millie” and other electricity customers on the West Coast.
“We filed over 100,000 pages of evidence over the last three years,” said Mike Gianunzio, the PUD’s general counsel.
That evidence brought to light scams named “Get Shorty,” “Death Star” and “Donkey Punch,” all tactics Enron traders used to manipulate electricity prices for profit during the 2000-01 West Coast energy crisis.
PUD attorneys even found a taped phone call that had two Enron traders discussing how they would intentionally lie to the PUD to drive up the cost of the electricity that it sold to the utility.
The high-priced electricity that the utility bought during the crisis led it to raise rates by more than 50 percent. PUD’s customers still feel the sting of that rate hike today.
Appeal allowed
The Federal Energy Regulatory Commission made several other Enron-related rulings on Wednesday, affecting utilities along the West Coast. It wasn’t clear whether one of those rulings changes the PUD’s lawsuit against Enron, seeking the return of millions of dollars the utility paid for overpriced energy.
What’s clear is that the PUD won the bigger fight.
FERC’s decision was 2-0 with one commissioner, Nora Mead Brownell, abstaining because of outside political pressure the board has received.
The proceedings “have been the subject of continuous statements, letters and press releases from nonparties regarding what is the appropriate outcome, questioning the competency and fairness of decision-makers and criticizing the rules of procedure that govern every adjudicatory proceeding,” she wrote in her decision.
Enron can appeal to a U.S. District Court or to the regulatory panel itself. An Enron spokesperson could not be reached for comment.
Klein said the panel’s statement that Enron commuted “financial fraud” makes the PUD confident it would win an appeal.
“That’s a very strong and helpful statement,” he said. “This is tremendous. This is the home run with the bases loaded.”
Former PUD general manager Ed Hansen said the decision makes the start of his retirement that much sweeter.
“That is excellent,” he said. “It’s a major victory for the PUD, for the PUD commission and most importantly for the PUD customers.
“You made my day,” he said.
Reporter Lukas Velush: 425-339-3449 or lvelush@heraldnet.com.
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